Oil's recovery will likely be slow in Alaska, as the pandemic drags on
In 2014, Alaska's oil industry workforce grew to record levels, reaching 15,000 jobs. After remaining at those levels through 2015, decreased production in the state's legacy fields and falling profits caused the number of oil jobs to begin declining. That trend finally reversed in 2019 - then the COVID-19 pandemic began to take its toll on global oil markets.
Economists at UAA's Institute of Social and Economic Research are carefully monitoring unemployment data in Alaska to determine which effects will be permanent, and what changes are only temporary.
Associate Professor of Economics Mouchine Guetabbi says that since the pandemic began, Alaska has lost 10% of its oil jobs - about 1,200 workers - most of which were employed by smaller service companies.
As price margins shrink, Guetabbi feels that major companies will have the solid fiscal footing to weather the storm, but these smaller employers could be at risk of folding for good.
In April, oil futures crashed down into the single digits, as well as plunging into negative territory at one point. While Alaska has seen significant crashes in the past, the pandemic's ability to put a halt to demand on a global scale has created an entirely new situation. Oil and gas analyst, Larry Persily says that going forward, we're likely to spend years looking for the "new normal" in Alaska's oil industry.
"The demand that was lost for transportation fuels in unprecedented," Persily said. "We lost 20-30% of the demand for crude oil, overnight."
One burning question is when exploration at several new sites across the state will resume -- and whether that would give the job market a sorely needed boost.
The Alaska Department of Labor's Chief of Research and Analysis, Dan Robinson tells KTUU that it will also take some time for the data to paint an accurate picture of what the oil market might look like in the future.
"The big questions will be about whether all of the drilling and the new drilling and the stuff that we were sure was going to happen at the beginning of the year ... whether and when that will all come back," Robinson said.
Persily says that the disruption of exploration in 2020 will take time to move past, even if demand eventually returns to previous levels.
"People can talk about prospects, be it Conoco, Oil Search or others. I think we need to realize that because this lost year, they have had to shut down exploration and capital spending," he said.
"All of that new oil is going to depend on prices, world markers, cash flow in companies. Being realistic, nothing is going to come in the next year -or 2 years- to save us."
Right now, the latest figures from the Alaska Department of Labor show oil jobs in Alaska sitting at around 8,900, as of May. Before the pandemic, there were about 10,500 jobs related to the state's oil industry.